Kasich Plan For Tax Hike, Cut Gets Mixed Reaction

A plan by Ohio Gov. John Kasich to tie higher taxes on oil and gas drilling to an eventual reduction of the statewide income tax met with opposition on multiple fronts Wednesday.

The oil and gas industry said the tax increase would discourage investment coming as a result of a boom in Utica and Marcellus shale drilling in the state. Cleveland-based Policy Matters Ohio, a liberal think tank, said the tax hike on oil and natural gas liquids within the next two years should be even higher than Kasich’s proposed 4 percent.

Meanwhile, public safety groups and advocates for the poor argued revenue from the increase shouldn’t be used for income-tax relief at all. They want to see money raised reinvested in government programs hit with recent cuts.

“They’ve cut local governments by 50 percent, and local governments are where the most essential services are provided – police, fire, emergency medical services,” said Ohio Fraternal Order of Police president Jay McDonald. “And those local governments are really struggling to provide those services because of the lack of funding, and the state is directly responsible for that lack of funding.”

Kasich, a Republican, proposed his one-two tax punch as part of an unusual “mid-biennium review,” which revisits the state’s $57 billion, two-year operating budget after just one year.

Kasich’s idea was inspired by Congress, which passes a budget annually. The former congressman called his concept historic, and the sweeping policy proposals touching energy, education, health care and taxes necessary.

“Frankly, almost every time I turn around I find another piece of broken Ohio,” the Republican governor said in unveiling details to reporters.

State budget director Tim Keen said that as U.S. House budget chairman in the 1990s, Kasich became accustomed to the cycle of annual budgets in Washington. Keen said the administration has spent the past six months coming up with its second set of big policy priorities in as many years. The current budget cycle began July 1.

The Ohio Oil and Gas Association noted in a statement that the tax structure for the industry was revamped just two years ago. The industry group, which says its members are poised to invest as much as $34 billion in the state over the next several years, called the current tax system “fair, competitive with neighboring states and attractive to investment.”

“Though we would generally support an income-tax decrease, we do not support asking one industry to disproportionately fund it,” it said. “We also believe that Ohioans who have struggled during the economic downturn would prefer to have a good-paying job now, instead of a small tax break years down the road.”

The liberal policy group ProgressOhio criticized Kasich for using the policy package to reward political allies. Executive director Brian Rothenberg said he heard “nothing new” in the proposals.

Kasich’s wide range of policy proposals also drew praise from a host of interest groups.

Joel Potts, who directs the Ohio Job and Family Services Director’s Association, said the governor’s proposal to further streamline and simplify eligibility for public assistance programs.

“The successful implementation of the Governor’s plan will allow caseworkers to spend less time on unnecessary bureaucratic processes and spend more time focused on achieving positive outcomes for Ohio’s families, seniors and disabled populations,” he said in a statement released by the Governor’s Office.

The Ohio Environmental Council’s Jack Shaner called elements of Kasich’s energy plan, including a proposal to capture and reuse waste heat, “really positive and ambitious.”

Shaner said his group will wait and see whether allowing that heat to count toward Ohio’s renewable energy benchmark hurts development of other renewable sources, such as solar and wind.

Opposition raised to the plan may not bode well. Kasich’s proposals lack the mandates that force state lawmakers to pass a traditional budget – politically tough as it can be – every two years.

The traditional operating budget faces a set deadline as well as a requirement that it balance, for example. It’s also timed to fall in a non-election year, when elected officials presumably can devote more attention to it.